Levin v. Gates

The plaintiff is the owner of a mortgage for the sum of $4,000 which he seeks to foreclose. He alleges that the defendants have or claim to have some lien subsequent to the lien to foreclose which this action is brought. The defendants Vought and William G. Ver Planck as substituted trustees allege that they are owners in fee of said premises and have a title superior to that of the plaintiff and also that they were, prior to July 9, 190-9, the owners of a prior mortgage for $36,000 on the same premises, and. that they foreclosed said mortgage, served the plaintiff and his wife in the proceedings and bought the property under a decree which barred and foreclosed the plaintiff.

The sole issue of fact at the trial was the question whether or not the plaintiff was served in the foreclosure suit brought by the defendants. Hpon this issue the plaintiff prevailed, for it appeared undisputed that the summons and complaint were served by a detective of no great acumen upon the plaintiff’s brother who represented himself by a transparent fraud as the plaintiff. Hpon the issues raised by the pleadings the plaintiff would ordinarily have become entitled to a decree of foreclosure and sale. He claims that this sale should be free from any claim of defendants, on the ground that the defendants’ title under the mortgage became merged in the fee which they acquired. Such a contention is not worthy of much consideration. In equity the merger depends upon the intention of the holder of the title; and a court of equity will not hold that there was a merger where it clearly appears that such a result would work a hardship to him. Moreover, our courts have repeatedly held that, under similar circumstances, the holder of the title must, as to subsequent mortgages not foreclosed, be regarded as a mortgagee in possession. The plaintiff urges that in all these cases the holder was asserting a right under the mortgage, while in this case he only claims the fee title. I find that this dis*236tinction does exist in the cases, hut I do not find that it is a material distinction. The defendants here believed that they had a good title under the sale. When at the trial they found that it was defective, they immediately urged their title under the mortgage; and I now hold that there has been no merger. Moreover, in another action between these parties, brought by the defendants to foreclose the' plaintiff’s mortgage, the ■Appellate Division has held that they need not allege that the plaintiff was not served, but may bring an action to foreclose even a claim to the title (Vought v. Levin, not yet reported) ; and this opinion is an authority, binding upon me in this case, that there has been no merger, even though the defendants choose to rely upon the validity of their own foreclosure.- Under the authority of Denton v. Ontario County National Bank, N. Y. 126, 138, this sale, if ordered, must be in subordination to all the defendants’ rights. The defendants, however, claim that the sale should not be decreed, but that they should be allowed to amend their answer and plead as a counterclaim that the plaintiff knew of the pendency of their foreclosure proceedings but omitted to give notice of his interest or to call attention in some way to the defect in the proceedings, and they are, therefore, entitled to a decree of strict foreclosure against the plaintiff.

It appeared on the trial from questions asked by myself that the plaintiff and his brother were associated in business; that plaintiff knew that his brother had been served with a summons in some action, although the summons was intended for himself; that he never asked to see the papers, or inquired as to their contents, but that he did see the advertisement of sale and consulted his attorney about it, but took no steps to call the attention of any of the parties to the defect in their proceedings.

I feel that I should not allow the amendment proposed. The defendants "might have counterclaimed for a foreclosure in their original answer. They knew all the facts except the plaintiff’s knowledge of the original proceedings, but they preferred to bring an independent action. I do not feel that the mere fact that they now know that the action could be for strict foreclosure instead of by the ordinary action enti*237tied them to amend their pleadings at the trial to obtain affirmative relief. On the other hand, under the conceded facts, “ it can be said that the junior mortgagee has waived the right to exercise the power of sale or estopped himself from insisting upon it and in equity should be required to redeem.” Denton v. Ontario County Bank, supra, 135. I will not,, under such circumstances, allow the plaintiff to assert his right in a court of equity. If necessary, the pleadings may be amended to conform to the proof in order to constitute a defense, and I' will then dismiss the complaint with costs.

Ordered accordingly.